We talk to lots of business owners in trouble with merchant cash advances.
Did you know…
…so many small businesses have cash advances…
…these “MCA” companies are running out of people to sell a merchant advance to?
Pretty scary, right?
So… these “working capital providers” came up with a new product.
Now, there are a few different names for it…
…reverse consolidation loan…
…merchant advance consolidation…
…mca consolidation loans…
You know what?
Here’s the name that should be used to describe these products…
Want to know why?
How MCA Consolidation Works ("Reverse" or Otherwise...)
Imagine you’ve got merchant cash advances burning a hole in your business.
A “reverse consolidation” is a transaction where you receive a new cash advance that deposits enough money in your business bank account each week to pay your existing cash advances. Some companies call this a merchant cash advance consolidation too... but it's the same filthy animal.
You make a new daily payment that is typically lower than your current daily payments, and once a week the “consolidator” deposits enough money in your business account to pay your other cash advances.
The reverse consolidation is typically a much longer term than your current advances, so your daily hemorrhage is now less than before by a modest amount.
Of course... you can learn about better ways to get out of a merchant cash advance... but
Breathing room from lowering your daily sounds good, right?
I bet you haven’t been told the whole story…
…here are 5 things I bet you don’t know yet…
1. A Reverse Consolidation Can Double Your Debt
“Consolidation” is in the name of this product.
Want to know the truth?
Reverse consolidations don’t consolidate anything.
Imagine you took out $100,000 in merchant cash advances, and you’re bleeding out $1,150 a day.
You’re still getting whacked for that $1,150 but those nice consolidator people will now pay you $5,750 to pay the merchant cash advances once a week until they’re gone.
Of course, you’re also paying the “consolidator” every day now. That’s another $500 or so a day and will continue for another year or more after you’ve paid off all your original cash advances.
Want to know big story they won’t tell you?
What started as $100,000 in debt can easily become $200,000 the day after you sign papers for that “consolidation.”
(Remember… it’s not $100k they’re loaning you… it’s the amount it takes to pay off your current MCAs… and then they plop around a 50% finance charge on top of that…)
But wait… it gets worse…
2. You Can Owe Money for Funds You Never Got
Let’s say you sign up for one of these merchant advance consolidation loans.
The second you sign a contract to pay X a day for X months you are now on the hook.
Back to our previous example, you started by taking out $100,000. Now you’ve got $180,000 (maybe a little more, maybe a little less...) out in debt.
What happens if you miss a payment one month in?
(Remember, all it takes to miss a payment is for your bank account to be too low at any time over the 12-18 months that they’re going to suck your money out every single day…)
Did you know that they’ll smack you with enormous penalties?
…and those penalties might push you into “default?”
…and in that month maybe you only received $20,000 or so…
…but they can sue you for the entire amount they are contracting with you for?
…which could be $100,000?
3. Only Companies that Do MCAs Offer Reverse Consolidations
Have you noticed…
…pretty much any company that offers reverse consolidations does merchant cash advances too?
If you’re looking into a reverse consolidation, it’s because you’ve gotten into trouble with merchant cash advances.
First… it’s probably not your fault.
We have spoken to hundreds of business owners who have had business cash advance problems.
Most business owners with MCA’s tell us that most if not all the salespeople they spoke with lied to them about the rates, terms and other key information about business financing.
Second… do you really think a company that specializes in selling the heroin of business financing is going to save you? Would you ask a drug dealer for help?
(There are way better ways to get out than a reverse consolidation...)
People get into problems with merchant advance loans because the marketing, sales, and product are designed to be confusing. By the time you know what hit you… you’re already deep into quicksand.
If anything, reverse consolidations sound more confusing that the loans they’re trying to get you out of.
So… let’s get this straight…
…a company sells a sleazy, confusing product…
…then sells you a more confusing product to get you out of the product that is choking you out…
…calls it a consolidation when it doesn’t consolidate anything whatsoever…
…and that’s going to help your business?
Yeah, let me know how that one works out for you.
4. That Term Loan Pitch? Yeah... That's a lie
Here’s a pitch many small business owners hear before signing up for a bad deal…
…”Yeah. After you make a few weeks of payments… you can convert this into a term loan.”
Of course, this won’t show up on any of your paperwork.
Many folks have told us that when they inquire about the promised “term loan” the immediately get ghosted and never are able to contact that sales rep again.
Think about it… they’re selling you a product with soul-crushing finance charges.
Once they’ve got their claws into you… would they really turn around and convert you to a low-rate loan with reasonable monthly payments?
When pigs fly, right?
So… maybe I’m wrong…
(It happens all the time, just ask my wife…)
Just make sure that super-good deal you are promised shows up in the paperwork you sign.
Otherwise… good luck.
5. Reverse Consolidations Can Keep You From Qualifying for Non-BS Deals
Remember… we mentioned that the day after you sign that contract for a reverse consolidation your outstanding obligations can potentially double?
That can prevent you from:
- Acquiring a term loan to consolidate your merchant cash advances
- Using an outside provider to renegotiate your cash advances
- Using real estate or equipment equity as collateral to consolidate your advances
Maybe a reverse consolidation loan is the best option for you.
Ok, ok… that’s for you to decide.
I happen to think a MCA reverse consolidation loan is a garbage product, but maybe it works for you.
(There’s an old movie, Leaving Las Vegas, where Nicolas Cage played a guy who chose to drink himself to death… he died at the end, but it worked for him).
Seriously though, give us a call and we’ll let you know if there may be smarter options.
Give us a call at (800) 786-5696 or click the picture below to get started.